Startup Latin America: The Digital Revolution Heads South

Sept. 25, 2012— -- Inspired by tech icons (and young billionaires) like Facebook's Mark Zuckerberg and Twitter's Jack Dorsey a growing number of entrepreneurs in Latin America are embracing the digital revolution and starting new tech ventures.

These so-called "technolatinas" are charting their own path but are taking advantage of connections to U.S. innovation centers like California's Silicon Valley.

"The tech boom in the U.S. has ignited the imaginations of entrepreneurs in Latin America," says Juan Pablo Capello a Miami-based entrepreneur and lawyer. He also believes that the open and untapped internet sector offers young entrepreneurs the opportunity "to avoid the entrenched and established business interests" that dominate the region. The result has been an increase in investments in new startups.

Supporting this growth is a burgeoning network of Latin American firms with ties to the U.S. tech sector. While other emerging regions are trying to build their own versions of Silicon Valley from scratch, startups in Latin America have the advantage of working directly with Silicon Valley entrepreneurs and investors.

Being in the same hemisphere has helped. A number of Latin American startups have registered their companies in the U.S. and North American investors and mentors don't have too far to travel to scope out potential investments. Palo Alto is just 500 miles north of the Mexican border and a few hours by plane to South America.

Both Mexican.vc, an investment fund and business accelerator based in Mexico City, and Start-Up Chile, a government initiative to attract foreign entrepreneurs, have taken advantage of close links to Silicon Valley and California.

David Weekly, a founder of Mexican.vc, is based in San Francisco and the company was recently acquired by the Silicon Valley investment fund 500 Startups.

Start-Up Chile, which aims to attract foreign entrepreneurs to spend a year in Chile building their business, is inspired by business accelerators in the U.S. and the impact of U.S. immigrant entrepreneurs like Google co-founder Sergey Brin. Prior to helping launch the project for the Chilean Economy Ministry, Nicolás Shea ran his own startup business in Silicon Valley.

Building on their links to U.S. innovation centers, both Mexican.vc and Start-up Chile have been successful putting their countries on the startup map and bringing technology out of computer labs and into the marketplace.

So, where is the best place in Latin America to start a new tech firm?

After a slow start Mexico is definitely heating up. In August, the investment firm Alta Ventures closed a $70 million round of fundraising which will be invested in startups throughout the country. According to the Latin America Venture Capital Association, Mexican startups raised $459 million in 22 deals in 2011, compared to $211 million in 2010.

Capello sees a "tremendous opportunity" in Mexico. "Mexico is the market that has been overlooked and will outperform many of the other markets in the next 18 months," he told ABC News/Univision in a phone interview.

Argentina and Brazil had a head start over Mexico thanks to higher internet penetration and a solid pool of engineering talent.

But both are hampered by complicated business environments. Argentina has the most advanced engineers but Brazil has a better environment to grow a firm, with a number of private and public innovation initiatives focused on promoting entrepreneurship.

Even though they are smaller markets, tech-based entrepreneurship is also taking off in Colombia and Chile.

"While the startup environment in Colombia is still nascent, it's growing quickly given the emergence of co-working spaces and local accelerators," says Nicolai Bezsonoff, the co-founder of the startup .CO internet which has Colombian origins. However, the lack of local startup funding and technical skills pose significant challenges to future growth.

Meanwhile, Miami, which is often referred to as the capital of Latin America is also vying to become a tech hub for the region. According to Bezsonoff who is based in the city, Miami has set up the right ingredients including, "an angel investor community, mentors, co-working spaces and local talent."

"The emphasis of universities like UM [the University of Miami] and local business groups…to build out the startup eco system will help boost the Miami start scene even more."

Miami also provides a clear rules system and is becoming a gateway to the fast-growing U.S. Hispanic market.

The tech revolution is rapidly breaking down barriers in the Americas. The innovation centers in California, New York, and Miami are providing examples, mentors and investors while Latin America provides new markets, new ideas and cost efficiencies. Nonetheless, it is a competitive market and there are challenges ahead. Latin America's tech revolution is just getting started. Stay tuned.